If you’re looking to maximize your savings and earn a competitive rate on your money, a certificate of deposit (CD) can be a great option. By locking in a high CD rate today, you can watch your balance grow over time. However, it’s important to shop around and compare rates from different financial institutions to ensure you’re getting the best deal.
In the past, longer-term CDs typically offered higher interest rates than shorter-term CDs. This was to incentivize savers to keep their money on deposit for a longer period. However, in today’s economic climate, the opposite is true.
Currently, some of the best CD rates available come from Marcus by Goldman Sachs and NexBank. Marcus offers a 4.40% APY on its 14-month CD with a minimum opening deposit of $500, while NexBank offers the same rate on its 1-year CD with a minimum deposit of $25,000.
When considering a CD, the amount of interest you can earn depends on the annual percentage rate (APY). This is a measure of your total earnings after one year, taking into account the base interest rate and how often interest compounds. For example, a $1,000 investment in a one-year CD with 4% APY would grow to $1,040.74 at the end of the year, including $40.74 in interest.
The more you deposit in a CD, the more you stand to earn. For instance, if you deposit $10,000 in a one-year CD with 4% APY, your total balance when the CD matures would be $10,407.42, meaning you’d earn $407.42 in interest.
Beyond traditional CDs, there are other types of CDs to consider that offer different benefits. These include bump-up CDs, which allow you to request a higher interest rate if rates go up, no-penalty CDs that allow for early withdrawal without penalty, jumbo CDs that require a higher minimum deposit for potentially higher rates, and brokered CDs purchased through a brokerage with potentially higher rates or more flexible terms.
When choosing a CD, it’s important to consider not only the interest rate but also the type of CD that best suits your needs. By comparing rates and exploring different CD options, you can make the most of your savings and watch your money grow over time.
